Aoyama Sogo Accounting Firm

Innovation Speed Quality

Vol.01C h a i r m a n ’s

7/ 9/ 2021

C o l u m n

All the tax reforms for FY 2021 have been made available. Not only reforms related to countermeasures against
Covid-19, but also those promoting DX and carbon neutral investments have been newly introduced.
What will most affect the business of our firm are the revisions to improve the tax-payment environment. Due to therevisions, in addition to sealing a final tax return form, receiving prior approval for introduction of electronic filingfrom the district tax office director and keeping paper-based documents under the electronic account books and tax
records preservation system will not be required anymore.
Seeing the piles of documents from tax offices when preparing Reports of Payments and working on tax filings, I wasforced to think that we were really wasting paper, which is not friendly to the global environment.
Since our firm has been involved in many investment-related businesses, we would like tonot only better understand our clients’ ESG investment positions but also to engage inanything useful to eliminate the load on the environment, starting from what we can do.
This is the first ASA News Letter. We appreciate your support and look forward tocontinuing to work with you.
（Kazuhiro Matsuzawa, Representative Director and Chairman)

Renewable energy information
On June 4, the government approved the "FY2020 Annual Report on Energy (Energy WhitePaper 2021)", which provides an overview of its
measures for supply and demand in energy.
In Part 1 of the White Paper, which is packed with topics of
the year, various challenges faced and efforts conducted by
the Government of Japan in order to achieve carbon
neutrality are summarized. As for the contents, Part 1
explains several matters such as on-going changes in theenergy situation reflecting accelerated efforts toward
decarbonization in the private sector while the number ofcountries declaring carbon neutrality is increasing day byday. In Japan, Prime Minister Suga declared carbon
neutrality by 2050 in October 2020. Part 1 also provides anoverview of the trends in decarbonization in foreigncountries and Japan’s challenges and efforts toward 2050.
In addition, it points out a rise in ESG investments and afurther diversification of investment strategy seen in thefinancial sector, as well as recent phenomena in nonfinancial sectors such as more companies- e.g., RE 100 participant
companies - voluntarily declaring
decarbonization and some ofthem requiring their supply chain
companies to decarbonize.

There were some criticisms about the time frame to achievecarbon neutrality in the beginning, but as pointed out in theWhite Paper, carbon neutrality is inevitable in corporate
activities and ways to deal with this issue have become afocus of attention. Some companies have brought forward
their deadlines to achieve the objective. What we often see
today is a shift to 100% clean energy, and I think thatpeople are more conscious about the use of renewableenergy such as solar power generation in power supply.
On the back of such a trend, the number of projects related
to renewable energy significantly increased in the last fiscalyear. This is the first reversal we have experienced in which
the number of real estate based projects was less than thenumber of renewable energy projects in terms of thepercentage of annual orders received (number of projectsbasis). The trend has not changed this year and we havebeen receiving many inquiries about projects in which ourclients, through Limited Partnerships (LSPs), ask manypotential investors to contribute to anonymous SK-TK
scheme partnerships holding renewable energy related
assets. There are some projects hitherto rarely seen inwhich investment is made before development and risks
possibly arising from such procedure are also taken intoconsideration.
We have been working to set up a group company
specializing in advisory service since June 2021, hoping thatthe new entity will be of some help for many clients
through providing advice on the formation of LSPs andaccounting and tax matters. I would be grateful if you could
contact us whenever necessary. (Hirokazu Ando)

Copyright(c)2021 Aoyama Sogo Accounting Firm Co., Ltd. All rights reserved.

Aoyama Sogo Accounting Firm

Innovation Speed Quality

Vol.01

7/ 9/ 2021

R e a l E s t a t e M a r k e tI n f o r m a t i o nUrban Data Center
Since investments in data centers in urban centers by foreign investors are seen these days, I asked people involved in investment for theiropinions.
――Due to the pervasiveness of remote work and the increase in stay-at-home demand, etc., in the Coronavirus pandemic, demand in andinvestment appetite for large data centers in suburbs have been stronger. What kind of demand is there for data centers in urban areas
where the price of land is high?
At the extreme, users seeking today’s mainstream cloud services do not care about where data centers are set up as long as the services
are securely and seamlessly provided. However, mission-critical users such as financial institutions, telecommunications companies andbroadcasters usually set up the data centers in which they place their servers in convenient areas such as those within Yamanote-line.
They are eager to keep important core servers nearby in order to quickly go and check them when system troubles occur or to reach themon foot when disasters happen.
――Does it mean that they do not mind a little bit higher cost to receive such a benefit?
In addition to the above mentioned reason, there are various merits such as more stable power supply, higher
speed and capacity of internet connection, more reliable maintenance service systems, etc., in urban areas andareas within Yamanote-line than those in suburbs and outside cities, resulting in a lower operational risk. For yourinformation, property owners charge utility costs in the name of cooling the computer equipment, etc., together
with a certain level of rent which is able to justify their investment costs. This is actually called the “second rent”.
（Sigeru Hirai, Client Relations Group）

Tax-related Topicfor This Month

New Group CompaniesPurchase Tax Credits For Residential Rental Buildings

We incorporated ASA Reporting Professional K.K.
on April 14, 2021
Its services are mainly book keeping and preparationof statements of account and business reports.
What we particularly focus on is to promptly provide clients with data
through intensive response to DX, even if the volume of data is huge, andalso to make the working environment which has drastically changed due tothe Covid-19 calamity more flexible, in order to further improve the level ofvarious services for our clients.
As for DX, we are currently promoting it and believe that it will be possible
to quickly realize it by concentrating its functions in the new company. In
the future, we aim to achieve a level where accounting information can beprovided to our clients in almost real-time.
Regarding the working environment, we are now on our way to specificallyintroduce more flexible working hours, with full-time work not being theonly alternative, and to reduce restrictions on working places whileconsidering working from home in or outside Japan rather than commuting
to the office. We believe that the elimination of restrictions will help createa working environment in which employees with various knowledge andexperience can work for a long period of time.
By tirelessly working on the above matters, we will continue to provide theinformation needed by our clients accurately, promptly and continuously,
which is the meaning of our existence. We will appreciate the same
guidance and support to the new company as you have been providing toAoyama Sogo Accounting Firm.
On an auspicious day in July, 2021

With the amendments of the Consumption Tax Act in April, 2020, tax
credits related to residential rental buildings, etc., have not been subject
to the purchase tax credits since October, 2020. Since the amount ofpurchase tax credits for residential rental buildings was large, variousschemes for refunding the once-paid tax were created and amendments
to the Act were introduced in order to restrict the use of such schemes.
Prior to the above-mentioned amendments, two trials related to thepurchase tax credits for residential rental buildings were held and theHigh Court ruled on one of them on April 21, 2021.
A tax payer in this action claimed that the acquisition of residential
rental buildings should be taxable purchases solely required for taxable
sales since even if rental revenue, which is classed as non-taxable sales,
was generated, it was incidental at the time of resale. However, theTokyo High Court, in accordance with the assertion from the tax
authorities, judged them to be taxable purchases required for bothtaxable sales and non-taxable sales, citing that rental revenue wasexpected when the properties were acquired.
The other trial was held at the Tokyo District Court on September 3,2020. In this case, the tax payer‘s claim was accepted, meaning that theacquisition of residential rental buildings was taxable purchases solelyrequired for taxable sales.
The taxpayer in the former case appealed based on the allegation by thetaxpayer in the latter case for whom the Tokyo District Court had ruled
in its favor, but the Tokyo High Court rejected the allegation accepted by
the District Court. The latter case is now under appellate review by theTokyo High Court, drawing attention to what decision the appellate
court will produce. (Masafumi Kuwabara, Tax Consulting Group)

Copyright(c)2021 Aoyama Sogo Accounting Firm Co., Ltd. All rights reserved.